A Beginner's way to trade options.
- Thread starter jamit_05
- Start date
- Tags myvineet options saint smart_trade
Hari,
Budget will be presented during the market time so there is no surprise gap element there...so long straddle will be an expensive strategy....plain vanila call/put buying once the move in either direction starts will be great and cost effective......we may have a look at spreads....to reduce our costs....
Smart_trade
Budget will be presented during the market time so there is no surprise gap element there...so long straddle will be an expensive strategy....plain vanila call/put buying once the move in either direction starts will be great and cost effective......we may have a look at spreads....to reduce our costs....
Smart_trade
Hi scorpio.... all ok my friend...this thread was started basically to answer basic querries about options trading...there seem to be no more querries now..so not posting but if I come across a trade which I feel could be educative...will certainly post , not posting routine options trades.
Thanks for the concern...
,Best wishes....
Smart_trade
Thanks for the concern...
,Best wishes....Smart_trade
Hi scorpio.... all ok my friend...this thread was started basically to answer basic querries about options trading...there seem to be no more querries now..so not posting but if I come across a trade which I feel could be educative...will certainly post , not posting routine options trades.
Thanks for the concern...,Best wishes....
Smart_trade
Thanks for the concern...
,Best wishes....Smart_trade
Can you post routine options trades so that we can also learn, with your hand holding? By the by, do you advise to buy some 4700, 4800 Puts now, in view of the sharp run up of the market without correction, strong resistance at 4750- 4800 level and time remaining till the expiry? Pl enlighten. Thanks.
Regards,
Dhinakar
I was bullish on the market and I have bought nifty futures from 4300,4400,4500 and after market moves in my favour by 60-80 points..I have sold 4300,4400,4500 etc strike price calls which gave good premiums because of intrinsic value and time value both being present....this is a better approach than selling future and booking profits as it gives Rs 120-130 extra....This also makes sure that in case my bullish view fails and market tanks,I will get some good premium income to nurse my wounds:lol:
Buying 4700 put alone may not be a great idea as this is a short expiry month....( only 11 trading days till expiry....) and the time decay will hit you hard...let the downmove start and then consider a vertical spread ie buy 4600 or 4500 put and sell 200 points lower put to reduce your cost and effect of time decay.....that will be a better strategy in my view....
Smart_trade
Buying 4700 put alone may not be a great idea as this is a short expiry month....( only 11 trading days till expiry....) and the time decay will hit you hard...let the downmove start and then consider a vertical spread ie buy 4600 or 4500 put and sell 200 points lower put to reduce your cost and effect of time decay.....that will be a better strategy in my view....
Smart_trade
I am long on nifty futures and I have sold calls against this long position....Now I am feeling that the market has taken a good rally and is about to peak....( I may be totally wrong in this view so I need protection)
Today I have sold part of my NF long position at 4677 and that makes my call sale exposed to risk of market going up.....to counter that I have sold 4800 NF June puts at 221=50 .....if the mkt goes up....this put premium will give cushion to me...if it comes down,I am too happy to relpenish my NF sold today....
SMart_trade
Today I have sold part of my NF long position at 4677 and that makes my call sale exposed to risk of market going up.....to counter that I have sold 4800 NF June puts at 221=50 .....if the mkt goes up....this put premium will give cushion to me...if it comes down,I am too happy to relpenish my NF sold today....
SMart_trade
Hi ST
I'm a beginner to options. Till date I was trading in cash segments. Have a small querry. I know it's not the appropriate forum to ask this question. But this post of yours looks simmilar to my querry.
1. Can we buy a covered call on NIFTY futures? I mean can we buy nifty futures and sell an OTM call option so that if the call option becomes ITM, the buyer of the call option will exercise the option and we can offload. If nifty futures go down, we can pocket the premium.
2. For stocks can we buy covered call buying stock futures instead of stocks in cash?
Regards
DJ
I'm a beginner to options. Till date I was trading in cash segments. Have a small querry. I know it's not the appropriate forum to ask this question. But this post of yours looks simmilar to my querry.
1. Can we buy a covered call on NIFTY futures? I mean can we buy nifty futures and sell an OTM call option so that if the call option becomes ITM, the buyer of the call option will exercise the option and we can offload. If nifty futures go down, we can pocket the premium.
2. For stocks can we buy covered call buying stock futures instead of stocks in cash?
Regards
DJ
DJ,
sharing my views on your questions.
ST, feel free to add your views as well on these questions.
Covered call, by nature, is bullish strategy. You can very well execute it with futures, instead of using stocks as underlying instrument. Only difference is, you don't have to worry about the exercise of sold call
option on Index futures because they can be settled / excercsied only on expiry.
If nifty goes down, u are protected only till the limit of the premium that u have recived on call. If it falls beyond that level then u will be in loss.
Another point to keep in mind is the Delta - i.e. change in option price for each point change in stock/futures. Delta for Future / stock is 1 whereas for option it might be around 0.5 for OTM option or any other value less then 1. So when futures /stock gains 1 point,you option might just gain 0.5 points. So to cover your futures position and make this completely hedged, u need to double the quantity of options.
Yes. Nobody stops you from doing this. Only thing is you need to understand the risk involved in futures trading (i..e leverage provided). If you are tempted to this due to limit account size, then my advise will be to put strict stoploss on your futures position to limit your loss beyond what is covered by sold call premimum + brokerage etc.
sharing my views on your questions.
ST, feel free to add your views as well on these questions.
Covered call, by nature, is bullish strategy. You can very well execute it with futures, instead of using stocks as underlying instrument. Only difference is, you don't have to worry about the exercise of sold call
option on Index futures because they can be settled / excercsied only on expiry.
If nifty goes down, u are protected only till the limit of the premium that u have recived on call. If it falls beyond that level then u will be in loss.
Another point to keep in mind is the Delta - i.e. change in option price for each point change in stock/futures. Delta for Future / stock is 1 whereas for option it might be around 0.5 for OTM option or any other value less then 1. So when futures /stock gains 1 point,you option might just gain 0.5 points. So to cover your futures position and make this completely hedged, u need to double the quantity of options.
Yes. Nobody stops you from doing this. Only thing is you need to understand the risk involved in futures trading (i..e leverage provided). If you are tempted to this due to limit account size, then my advise will be to put strict stoploss on your futures position to limit your loss beyond what is covered by sold call premimum + brokerage etc.
Hello Mr Sinha,
AW10 has beautifully answered your question...Thanks AW10...I always appreciate your inputs ...
Covered call writing is a strategy where your market view is steady to mildly bullish....as long as the market does not go into tailspin,it works fine but if market starts a downtrend then the loss suffered in futures or stocks purchased for writing calls is always too large as compared to premiums one has received....and this is where covered call writer gets killed.....so have some kind of stoploss ( however far it may be ) and wind up both the legs of covered call if that situation happens....otherwise covered call is great....
You can sell call with long position in futures or long in stocks ( in cash market delivery) but be very careful about the risk it has ...once you understand the risk and are ready with risk control measures there is nothing to fear....
Best wishes ....
Smart_trade
AW10 has beautifully answered your question...Thanks AW10...I always appreciate your inputs ...
Covered call writing is a strategy where your market view is steady to mildly bullish....as long as the market does not go into tailspin,it works fine but if market starts a downtrend then the loss suffered in futures or stocks purchased for writing calls is always too large as compared to premiums one has received....and this is where covered call writer gets killed.....so have some kind of stoploss ( however far it may be ) and wind up both the legs of covered call if that situation happens....otherwise covered call is great....
You can sell call with long position in futures or long in stocks ( in cash market delivery) but be very careful about the risk it has ...once you understand the risk and are ready with risk control measures there is nothing to fear....
Best wishes ....
Smart_trade
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